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How Germany Builds Twice As Many Cars As The U.S. While Paying Its Workers Twice As Much

In 2010, Germany produced more than 5.5 million automobiles; the U.S produced 2.7 million. At the same time, the average auto worker in Germany made $67.14 per hour in salary in benefits; the average one in the U.S. made $33.77 per hour. Yet Germany’s big three car companies—BMW, DaimlerDaimler (Mercedes-BenzMercedes-Benz), and Volkswagen—are very profitable.

How can that be? The question is explored in a new article from Remapping Debate, a public policy e-journal. Its author, Kevin C. Brown, writes that “the salient difference is that, in Germany, the automakers operate within an environment that precludes a race to the bottom; in the U.S., they operate within an environment that encourages such a race.”

There are “two overlapping sets of institutions” in Germany that guarantee high wages and good working conditions for autoworkers. The first is IG Metall, the country’s equivalent of the United Automobile Workers. Virtually all Germany’s car workers are members, and though they have the right to strike, they “hardly use it, because there is an elaborate system of conflict resolution that regularly is used to come to some sort of compromise that is acceptable to all parties,” according to Horst Mund, an IG Metall executive. The second institution is the German constitution, which allows for “works councils” in every factory, where management and employees work together on matters like shop floor conditions and work life. Mund says this guarantees cooperation, “where you don’t always wear your management pin or your union pin.”

Mund points out that this goes

against all mainstream wisdom of the neo-liberals. We have strong unions, we have strong social security systems, we have high wages. So, if I believed what the neo-liberals are arguing, we would have to be bankrupt, but apparently this is not the case. Despite high wages . . . despite our possibility to influence companies, the economy is working well in Germany.

As Michael Maibach, president and chief executive of the European American Business Council, puts it, union-management relations in the U.S. are “adversarial,” whereas in Germany they’re “collaborative.”

Does such a happy relationship survive when German automakers set up shop in the U.S.? No. As a historian observes in the article, “BMW is a German company and it has a very German hierarchy and management system in Germany,” yet “when they are operating in Spartanburg [in South Carolina] they have become very, very easily adaptable to Spartanburg business culture.” At Volkswagen’s Chattanooga plant, the nonunionized new employees get $14.50 an hour, which rises to $19.50 after three years.

The article’s author, Kevin C. Brown, asked Claude Barfield, a scholar with the American Enterprise Institute, why the German car companies behave so differently in the U.S. He answered, “Because they can get away with it so far.”

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As a former employee of BMW I can tell you exactly how they manage to pay their employees so much. It relies on the fact that approx. two thirds of the employees are temp. workers (zeit arbeiter in German) and are paid little more than five Euro´s per hour with no benefits, for the same work. In fact at the plant were I had worked for more than three years only the management and a few others considered BMW employees, the rest were Temps. A ratio of eighty Temps to every BMW employee.

Minimum wage, by law, is 7.43, meaning about 10$/hour. However, negotiations with the union in 2008 guaranteed Zeitarbeitern (“temps”) a higher salary of between 11 and 28 euros, or $ 15 -36/hour. How do they pay more to workers and are more profitable? Rather than paying ridiculous amounts and bonuses to a small top percentage in a company (and as little as possible to workers), the distribution of wealth is a lot more fair. The results: more content and productive workers producing higher quality products. End result: everybody benefits.

You say that as if we have no reason to demonize unions. The very nature of a union is built on the idea that the individual melts into the collective, and that collective exists because of potential management abuse. I am an IT worker in a corporation, and the very thought of being in a union makes me sick. I don’t want to be part of a collective and have my compensation be collectively determined. I receive frequent large bonuses because of the quality of my work and my responsiveness to my customers. I don’t want a shop steward making sure I’m a cog that fits perfectly. Anyone who values individualism should detest the very concept of a union.

Some of the comments here are more intelligently written than the article itself. I’ve seen these “we need to embrace the union” articles for a lot of years, and they always cherry pick the good points in a far off land. Americans are always so sure that we’re screwing things up that we believe them. We may have a lot of problems, but not lovingly embracing unions isn’t one of them.

Yes indeed! This is also why for the overall economy we should borrow 10 trillion to stimulate the economy. the much small stimulus has saved or created millions of jobs, Imagine what we could do with 10x the spending!

minimum wage legislation is based on what job you perform, a cleaning lady will earn 8.85 EURO while at the same time I earned 5.80 EURO per hour and that in 2010. IG Metal has often proposed these higher wages over the years, but NO change has occurred in the real wages up to December 2010. That is why I left the position, I can post earnings statements to prove this! a higher salary of between 11 and 28 euros, or $ 15 -36/hour would have been a dream. To make the claim that such wages are guaranteed or by law are BLATANTLY FALSE!

Also I would like to address the fallacy of a more productive workforce. While working at a BMW plant I had the Union Representative approach me and inform me that I would have to start working slower. As I was causing turmoil in the work place by producing more parts per shift, working alone, as either of the other two shifts. my last few months I worked an eight hour shift in which i had a FOUR HOUR BREAK! All so that I would not produce more parts than the other two shifts. Is this what is meant as everyone benefits? So yes a small percentage got payed well, with vacation and Christmas bonuses, and the vast majority were paid very little. I will again state that at the plant were I had worked it had a ratio of eighty temps working for every (Unbefristet) Full BMW Employee.

Interesting idea, but the production numbers you (the cited study) are presenting are deceiving.

First, the focus on cars is misleading. Normal business press readers are not informed enough about the differences between cars and light trucks when you only mention cars. The US produces more light trucks than cars. The author should be showing total light vehicle production. Total light vehicle production in the US in 2010 was 7.6 million units (2.7 million cars and 4.9 million light trucks). In Germany, total light vehicle production in 2010 was 5.9 million (5.55 million cars and 0.35 million light trucks). So, the US produces more cars and light trucks, period.

In a similar vein, you and the cited article point towards BMW’s Spartenburg (actually Greer) plant for anecdotes. The Greer plant produces light trucks. So you are thinking cars for production and cars and trucks for storytelling. Another bad comparison.

Second, you need a better year for comparison. Try a pre-recession year. For instance, in 2011 the US-German production differential should be even larger, as our auto manufacturers increased output a bit less than 10 percent from 2010, which is a few hundred thousand units less than a million. Quite a production jump.

Know your data. This may be all explained in the fine print of the actual publication, but the headlines are definitely wrong, and someone has to point this out.